Atlantis ‘Ready To Do What Needs To Be Done’ On VAT

George Markantonis, president and managing director of Atlantis, said: “We’re thankful that it’s delayed to 2015 because we need the time to get ready. We don’t just have one system, we have 30 or 40 software systems we have to look at.

“There’s no doubt that we have to do something and we knew that and we have always just wanted to make sure that it was carefully thought through, which it has been. We are in support of the prime minister, we are in support of the Cabinet, and we are just going to do what needs to be done now that there is finality.”

Markantonis made his comments after Prime Minister Perry Christie announced that the government intends to implement VAT at a flat rate of 7.5 percent across the board on January 1, 2015, during his budget communication to Parliament yesterday.

Christie said the VAT would be brought in with “much fewer exemptions” than originally called for, in line with recommendations from the New Zealand tax experts and with no “wide-scale” simultaneous duty reductions.

Robert Sands, senior vice president of administration and external affairs for Baha Mar, called a flat rate of VAT at 7.5 percent with hotel occupancy tax eliminated a “move in a very positive direction”.

“Baha Mar was pleased to have participated in the public-private sector partnership with the government on the VAT initiative, and to have reached the outcomes achieved to date. The tourism industry could not have sustained a VAT at 15 percent.”

Sands said that representatives of the tourism industry and private sector met with the prime minister and his team at the Ministry of Finance to address the “important fine details of issues affecting the tourism industry.”

“We anticipate positive results,” he added.

During his presentation to Parliament, Christie revealed that in light of the potential negative impact of a high rate of value-added tax on the tourism sector’s competitiveness, tourism stakeholders had recently proposed a six percent value-added tax to the government as their preferred tax model.

This tax would have to be accompanied by employer and employee payroll taxes, an increase of the sea departure tax and an increase in other taxes and fees to compensate for the lower VAT rate, said Christie, pointing to the findings and recommendations of a study conducted by the Bahamas Hotel and Tourism Association (BHTA), submitted recently to the government.

The BHTA retained financial services firm Ernst and Young earlier this year to conduct economic modeling research to determine the impact of various tax and fiscal reform measures on the tourism industry.

The results of that study have yet to be formally released by the BHTA.

Christie commented on them yesterday as he stated that the government decided it could not go as low as six percent when it implements a VAT on January 1, 2015.

He said: “My government is fully sensitive to the very important role that tourism, as our premier sector, plays in our economy in generating activity and jobs. We are sympathetic to the difficult challenges that the sector faces in a highly competitive environment and we will continue to monitor developments to maintain the fundamental viability of this key industry.

“However, the fiscal challenges that we face are such that, on the basis of the balance of evidence and advice that we have garnered from all of the studies and from the experts, we are unable to accommodate the BHTA recommendation for a VAT rate as low as six percent.”

The recommendations of the BHTA fit with those of the Coalition for Responsible Taxation’s study on VAT produced by forecasting consultancy Oxford Economics to the extent that both called for a six percent tax on tourism.

However, the coalition’s study suggested a payroll tax would be the best fit to encourage growth of the tourism sector, the country’s major economic driver.

The report showed that more so than a VAT at 15, 10, or 7.5 percent, or a payroll tax at 12 percent, a six percent payroll tax would protect the competitiveness of the tourism sector, allowing it to grow the most over the short, medium and long term (to 2024).

However, in the long run, a VAT and a payroll tax were found to have similar impacts on debt reduction and key economic indicators.

Alison Lowe,
The Nassau Guardian
Published May 29, 2014